4. SRLP: Suggested Retail List Price. According to Brabec and Brabec (2006), the SRLP is approximately $18.

5. Constructed Retail List Price. This price is figured by
uplifting the wholesale price by approximately 130%. Typically, this price is
lower than the SRLP and results in somewhat lower earnings for the artist.

6. Mini-major record company: Does everything but
distribution.

7. Packaging deductions (amounts for CDs and cassettes): 20%
for cassettes and 25% for CDs.

8. Independent record company: Two types:

Truly
independent has no attachment to a major.

Semi-independent
is distributed by a major.

9. What is a point? 1% = ONE PERCENT.

10. Recording Advance: Artist or producer is issued an
amount of money and expected to turn in a completed and satisfactory master.
The producer or artist keeps any money not spent on the recording.

11. Recording Fund or Budget: The artist or producer is
allotted an amount of money and is expected to turn in a completed and
satisfactory master. In this case, the record company pays all of the bills
from this fund and any money not spent on production does not have to be
recouped by the artist.

12. Free goods deductions: Typically 15% of units produced.
These free goods are used for promotion.

13. Cross-collateralization: All advances, expenses or other
recoupable funds for any and all albums under one record deal are considered as
a single expense. In other words, if the first record doesnŐt recoup and you
make a second record, the artist must recoup the money advanced for both
records before they can begin to earn royalties.

14. Reserves: Typically 30% or more. This amount is held in
order to account for returns. Usually, after a period of two years, the account
is adjusted for returns and the artist is paid the balance.

15. Standard return privilege: In the past, the returns were
allowed to be 100% of shipment. Currently, retail stores are allowed to return
20% of the stock. Any amount over 20% is charged a restocking fee.

16. Profit & loss: Every artist has a profit and loss
sheet detailing the amount of advances issued and amount of money recouped.

17. Black position: Black means you are profitable.

18. Red position: Red means you are loosing money. The black
and red terms come from accounting practices that use black and red ink to
denote profit and loss respectively.

19. Standard breakage deduction: 10%. A&M records still
computes this deduction on contracts even though CDs donŐt break as often as
records.

20. New artist: Someone who has sold less than 250,000
records. Lower point structure for new artists. Typically, points range from 10
to 15 for signing with independent labels and 13 to 16 points for majors.

21. Midlevel artist: Someone who sells between 250,000 and a
million records. Royalty points tend to range between 15 and 17 points.

22. Superstars: Artists selling more than a million copies.
Points range between 18 and 20 points. These artists tend to have distribution
deals or co-ventures with record companies.

23. Gold album: An album selling 500, 000 or more.

24. Platinum album: An album selling one million copies or
more.

25. Floor: The smallest advance amount stipulated in an
artistŐs record contract.

26. Ceiling: The largest advance amount stipulated in an
artistŐs record contract.

27. Controlled composition: Any composition in which the
artist has a financial stake. The term control refers to the artistŐs control
to make decisions about the mechanical rate of the song because he/she has a
financial interest or benefit in the composition.

28. Standard controlled composition reduction: This is now
standard in record contracts and is a 25% reduction. Therefore, your mechanical
royalty is reduced from .091 cents to .06825 cents.

29. Controlled composition reduction for record club CDs is also standard
in record contracts and results in a 25% reduction. Therefore, your mechanical
royalty for controlled record club compositions is reduced from .091 cents
to 0.06825 cents.

30. Prospective escalation – A
negotiated escalation in the royalty points earned by an artist after achieving
a pre-determined sales performance marker such as gold or platinum album. The
escalation, ranging from .5 to 1.0 or higher, is applied to all royalty earning
units in excess of the negotiated performance marker. A bump up in your royalty
rate based upon reaching a certain sales quota goal. This escalation happens
after the artist has reached this sales figure. There is no change in rate
for any units sold prior to achieving the negotiated sales figure.

31. Retroactive escalation: A negotiated escalation in the
royalty points earned by an artist after achieving a pre-determined sales
performance marker such as gold or platinum album. The escalation, ranging
from .5 to 1.0 or higher, is applied to all royalty earning units from Ňrecord
one.Ó If a contract states that the
royalty rate retroactively increases with the number of CDs sold, then the
artist would paid the higher rate after reaching the stipulated amount and
would be paid the higher rate from record #1. In other words, if your contract
stipulates a 16 point royalty rate that increases retroactively to 17 points
after the sale of 500,000 CDs, the artist would be paid 16 points for all CDs
up to 500,000. Upon selling 500,000, the artist would be paid 17 points for
all future CDs and one extra point (16 +1) for the CDs from 1 to 499,999. The
term retroactive means Ňfrom the beginning.Ó

32. All in deal: This refers to a situation where the
artistŐs points include the amount for producerŐs points. For example, if your
producer receives 3 points and your artist deal is for 16 points, then you are
really earning 13 points and the producer is earning the other 3 points.

33. Commercially satisfactory recording/master: A master
accepted by a record company because they believe it will sell is termed a
commercially satisfactory master.

34. Options: The record companyŐs way of keeping successful
artists by extending their contracts. The number options or additional records
is spelled out in the contract and is at the whim of the record company. If you
sell, the record company has the right to Ňexercise the optionÓ and make you
record another CD. If you donŐt sell, they have the right to Ňnot exercise the
option.Ó

35. Mechanical royalties: This money is paid to the
publisher at the time of pressing. This money is not recoupable and is due
when records are printed, not when records are sold. This money is upfront
money and, because it is not recoupable, companies invented the controlled
composition clause in order to cut down on upfront expenses.

36. Maximum statutory mechanical royalty rate for a song up
to 5:00 in length: 9.1 cents.

37. Statutory mechanical royalty rate for a song longer than
5 minutes long. Be able to compute the full mechanical royalty owed for a song
longer than 5 minutes.For songs longer than 5:00, the extra mechanical royalty
rate is 1.75 cents for every minute or fraction thereof.

39. Recoupable moneys: Money issued by the record company to
the artist in the form of recording advances, recording costs, video costs,
tour support, independent record promotion and other developmental or
promotional costs. The artist must recuperate or earn this money, at their
negotiated royalty rate, from sales prior to earning royalties. ItŐs a lot like
paying for dinner by washing dishes.

40. CD royalty rate – Typically, this royalty rate is
based on 75% to 85% of the cassette royalty rate. For example, if the artist
has negotiated a 10-point royalty rate, the CD royalty rate will range from
7.5 to 8.5 points.

41. P&D deals – Packaging and distribution deals.

Wholesale
price – set via contract.

Distribution
fee is typically 18% to 20% of wholesale.

Marketing
and promotion fees are an additional 2% or 3%.

Returns
can kill your profit.

Some
P&D deals require upfront money or a guarantee to eat a percentage
of the returns.

42. Co-Venture – a deal where the artist and record
company share risk and profit from all sources including songwriting, touring,
merchandising, sponsorships, acting, film scoring, etc.. Large advances, long
term relationships.

43. Record contract deductions:
43-1. Many record contracts add a 15% to 25% deduction to the artistŐs negotiated
royalty point base resulting in a royalty ranging between 75% and 85% of the
negotiated rate. This deduction accounts for blank CDs and piracy.

43-2. The free goods deduction is 15%.

43-3. The breakage deduction still used by some companies is 10%.

43-4. The packaging deduction for CDs is 25%. The packaging deduction for
cassettes is 20%.

43-5. Companies hold approximately 30% of the artistŐs royalties for a period
of up to two years in order to account for returned product. If the product
is not returned, the companies will pay the artist any royalties owed after
the accounting period has been completed.